Minimum wage hike hits booming Oakland dining scene

Andres Sanchez sets a table for lunch at Oakland’s Bocanova, which has done away with traditional tipping.

Andres Sanchez sets a table for lunch at Oakland’s Bocanova, which has done away with traditional tipping.

Photo: Michael Short

Photo: Michael Short

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Andres Sanchez sets a table for lunch at Oakland’s Bocanova, which has done away with traditional tipping.

Andres Sanchez sets a table for lunch at Oakland’s Bocanova, which has done away with traditional tipping.

Photo: Michael Short

Minimum wage hike hits booming Oakland dining scene

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The 36 percent uptick that lifted Oakland’s minimum wage to $12.25 an hour this week is already transforming the city’s booming restaurant scene — but not in the way that politicians, activists and restaurateurs anticipated.

The wage increase puts more money in the pockets of most restaurant workers, but to keep pace with higher costs, some restaurants have upped menu prices by as much as 20 percent. Others have tacked on a mandatory service charge to the bill and eliminated tips for servers, potentially reducing the amount they earn.

Some wonder whether the higher prices and surcharges will turn off customers and blunt Oakland’s growing reputation as a foodie haven where 300 bars, cafes and restaurants opened last year.

While supportive of raising the wage floor, some of the city’s top restaurateurs fear they will lose customers due to higher prices.

“Yeah, I’m worried about it,” said Charlie Hallowell, who raised prices 16 percent at his three trendy restaurants in Oakland, including Pizzaiolo and Boot & Shoe Service, which were on The Chronicle’s 2014 list of the Bay Area’s Top 100 restaurants.

Since Pizzaiolo opened a decade ago, Hallowell said, the profit margin has been 2.8 percent — and that’s at a hip Temescal district restaurant with a line out the door most nights. Nationally, the average profit margin was 5.1 percent at privately held restaurants in 2013, according to Sageworks, a financial information firm.

To help pay for the increase, the most expensive pizza at Pizzaiolo will now cost $24, up from $20.

“I want to raise the minimum wage. I want everybody to make more money. But I don’t know what’s going to happen. None of us do,” Hallowell said.

No line for tips

At Bocanova, a high-end restaurant in Jack London Square, there’s now no line for tipping on the check. A note on the menu reads: “In lieu of gratuity, a 16% Lift Up Oakland Surcharge & 4% Service Charge will be added to your check beginning March 1st, 2015.”

The 4 percent goes directly to servers. The 16 percent covers the cost of raising other staff salaries.

Owner Rick Hackett is betting on the idea that customers will respond better to a percentage fee than increased prices across the menu.

“It didn’t make sense to raise prices,” said Hackett, who owns the restaurant with his wife, Meredith Melville.

He patterned the move after Berkeley’s trend-setting Chez Panisse, which began to include a similar service charge on the bill two decades ago. However, owner Alice Waters left a space on the check for an additional gratuity, and most customers have continued to add a few bucks there.

By taking on a surcharge and dropping tips — which are unstable and a tax headache — Hackett envisions service jobs becoming more standardized.

“Typically, if that was a tip, 100 percent of it would end up going to the workers,” said Jayaraman, the director of the Food Labor Research Center at UC Berkeley.

She fears restaurateurs will keep a chunk of it for themselves.

Oakland Mayor Libby Schaaf, who campaigned on raising the minimum wage, said that Bocanova’s move appears to be legal.

“We’re hearing lots of different responses to this requirement,” Schaaf said Wednesday. “It’s disruptive. If we can have disruptive technologies, we can have disruptive social change. Let’s disrupt poverty.”

Schaaf, who as a college student in the 1980s lived off of tips while she worked as a hostess at Scott’s Seafood in Oakland, said “tips aren’t sustainable. It’s very stressful. You can have a great week or you can have a horrible week.”

The activists who helped push the wage uptick are wary of the ways restaurants are implementing it.

“We are watching very carefully to make sure that none of these changes result in workers losing pay they are entitled to,” said Lift Up Oakland President and SEIU 1021 Vice President Gary Jimenez. “We need to lift up our waiters and servers, not shortchange them.”

Politically, few will speak out against Measure FF, which 82 percent of voters supported in November. Many, including those in the business community, say they support raising the minimum wage though they wish it had been phased in over several years, as in San Francisco, where it will increase to $15 by 2018.

San Jose’s experience

Schaaf compared Oakland’s increase to how San Jose increased from $8 to $10 an hour in March 2013. There, a UC Berkeley study found, the price of a $10 food item went up about 15 cents compared with similar items in other cities in the subsequent six months after the law went into effect. That’s far less than the early uptick at high-end restaurants in Oakland.

Nonetheless, Schaaf wasn’t taking any chances Wednesday, urging that “it’s time for Oaklanders to put their money where their votes were,” and dine local — starting this weekend.

“On Thursday, hit happy hour,” Schaaf said Wednesday. “Friday, take your sweetie out to dinner. Saturday, get some breakfast. Sunday, there’s some great brunches around Oakland, and I’m here to tell you that fair-wage food tastes better.”